e-Forex July 22

With Neill Penney, Group Head of FX at LSEG
AT THE HEART OF LSEG’S
COMMITMENT TO THE
FX INDUSTRY IS THE RE-
PLATFORMING OF OUR FX
VENUES ONTO THE SAME
TECHNOLOGY THAT LSEG USES
TO DRIVE THE LONDON STOCK
EXCHANGE AND TURQUOISE
THE E-FOREX INTERVIEW
plumbing of the industry is very much
set in a simple RFQ model at the
moment. It’s essentially unchanged
from the 1999-2001 period when eFX
first took off. The work we’re doing
is to help the industry move forward
from there. We want to enable our
customers to try more sophisticated
trading techniques and yet not to fall
back into manual trading because the
industry plumbing doesn’t support
this level of complexity.
For example, we have been working
on a new execution workflow called
“Forwards First Fixing”. This capability
is for customers who want to trade FX
Forward competitively and then give the
winner the spot leg to trade at the WM/R
fix. The result of that is the customer gets
the industry benchmark fix for the spot
portion together with best execution on
the forward points. It’s a complicated
workflow. Our challenge as an
infrastructure provider is to do this in a way
that doesn’t impact pricing automation
and straight through processing. To
ensure we deliver the benefits of this
workflow without the potential problems,
we’ve been working closely with both
our buyside customers and our banks.
This includes not just thinking through
the technology side, but in agreeing
protocols so that both counterparties are
comfortable with handling the market risk
between agreeing the forward points and
the fixing time.
We’re very proud of the solution that
we’ve developed. It is innovative and
will genuinely move the state of the
market forward while retaining the
full automation that people get from
a simple RFQ.
What are going to be the key
technology, trading and FX business
focus areas for many market
participants over the next few years
and where will LSEG be looking to
make further investments to meet
those requirements and to deliver
greater value for your clients?
The key trend for the industry
continues to be pressure on all
industry participants to do more with
less. Participants need to address a
wide set of challenges. They need to
increase their trading profitability;
to increase their trading efficiency;
to reduce trading risk; to increase
their auditability; to get a better
understanding of their trading
performance; to use increasing
advanced trading methodologies; and
to adopt new technologies such as
algos and clearing. And many need
to do all this while spending the
same, or less, on their trading desks
than the previous year. It’s a lot to
tackle, and most of our customers are
looking for strong strategic partners
to help them.
This is how we organise our thinking,
around serving our customers’ needs,
understanding the problems they
have and developing ways that we
can help them. For many of our
customers, the priority is to find
end-to-end solutions that simplify
this complexity and minimise total
cost of ownership. Other customers
46 JULY 2022 e-FOREX